(Yicai Global) Sept. 20 -- Several European and US multinationals have moved out of Hong Kong’s central business district as first-class office rental costs continue to rise.
“Some central office rentals have risen above HKD200 (about USD25.49) per square foot,” Ma Anping, the manager of Jones Lang LaSalle’s research department told Chinese business newspaper 21st Century Business Herald. “This is mainly due to an influx of Chinese companies’ moving into first-class offices in areas such as Central and Admiralty, while some European financial institutes and multinationals have chosen to rent in the Eastern District and Kowloon to reduce operating costs,”
Digital currency exchange BitMEX cut a deal to rent the whole 45th floor of Cheung Kong Center in Central with an area of 20,000 square-feet and a record-high rental of HKD225 (USD28) per square foot in August.
US investment bank Goldman Sachs moved its Hong Kong unit from Central to Lee Garden Three in Causeway Bay in the first quarter of this year with the rental of 93,000 square feet of space. Ernst & Young’s Hong Kong branch has also moved from Citic Plaza in Admiralty to Taikoo Place in the eastern district and rented an area of about 184,000 square feet, which can save the firm around HKD4 million (USD500,000) per month, an insider said.
Total first-class rental in central Hong Kong reached 500,000 square feet, of which Chinese firms accounted for 60 percent of rentals, up some 30 percentage points on the year before. In the second quarter this year, Chinese firms made up 85 percent of newly leased space.
The rental surges come against the background of a falling vacancy rate, which has been in decline for two decades. It has fallen to 4.2 percent in August from 11.9 percent in early 1999. The vacancy rates of Hong Kong’s four major business districts are all below 2 percent, among which Central office vacancy rate has already dropped to 1.5 percent.
The average annual growth rate of Hong Kong office rentals has been 6.5 percent for three years, while that of Central was 9.5 percent, making Hong Kong the world’s top city for commercial building rental for several consecutive years. The special administrative region’s first-class average monthly rental reached as high as HKD86 (USD11) per square foot in the second quarter, which was 21 percent higher than that of Tokyo and 54 percent higher than Singapore, Jones Lang LaSalle’s data shows.
In the long run, increasing rents and a lack of office spaces may limit Hong Kong's ability to tempt multinationals into setting up their Asian headquarters in the city, a market player said.
Editor: William Clegg